The U.S. government has traced some of the $1.7 billion released to Iran by the Obama administration to Iranian-backed terrorists in the two years since the cash was transferred.

According to knowledgeable sources, Iran has used the funds to pay its main proxy, the Lebanon-based terrorist group Hezbollah, along with the Quds Force, Iran’s main foreign intelligence and covert action arm and element of the Islamic Revolutionary Guards Corps.

The U.S. money supplied to Iran as part of an arms settlement dating back to the 1970s also has been traced to Iran’s backing of Houthi rebels seeking to take power in Yemen. Iran has been supporting the Yemen rebels as part of a bid to encircle and eventually take control of Saudi Arabia.

The intelligence tracing the American funds to Iranian-backed terrorists is likely to further fuel President Trump’s effort to undo the Iran nuclear deal, the Obama administration’s main foreign policy initiative codified in the 2015 Joint Comprehensive Plan of Action, as the Iran nuclear deal is called.

Despite promises to reject the deal during the presidential campaign, Mr. Trump announced in January the U.S. would not pull out of the Iran nuclear accord for now. But the president criticized the transfer of money to Tehran and signaled that Washington is going after Iran’s funding of terrorism.

“The enormous financial windfall the Iranian regime received because of the deal — access to more than $100 billion, including $1.8 billion in cash — has not been used to better the lives of the Iranian people,” Mr. Trump said Jan. 12. “Instead, it has served as a slush fund for weapons, terror, and oppression, and to further line the pockets of corrupt regime leaders.”

Mr. Trump said the United States is countering Iranian proxy wars in Yemen and Syria and cutting the regime’s money flows to terrorists.

“We have sanctioned nearly 100 individuals and entities involved with the Iranian regime’s ballistic missile program and its other illicit activities,” he said.

The American money sent by the Obama administration was first flown to Switzerland aboard an unmarked chartered aircraft, and then converted into euros, Swiss francs and other currencies. An Iranian transport aircraft flew the cash to Iran in January and February 2016 in three shipments. The first aircraft arrived in Tehran on Jan. 16, 2016, with $400 million piled on wooden pallets. Two other aircraft shipments of cash were sent on Jan. 22, 2016, and Feb. 5, 2016, totaling $1.3 billion.

In all, Iran received $1.7 billion in U.S. cash that has been used to fund its covert terrorist support operations.

The first $400 million coincided with the release of four Americans held hostage by Iran, a move by Iran to make the money appear as if the Obama administration had paid a ransom to Tehran for the release of the Americans.

The Obama administration sought to justify the cash transfers to the world’s leading state-sponsor of terrorism by claiming the U.S. government was set to lose a legal arbitration case over arms purchases from the United States made by the government of the Shah of Iran, the predecessor government to the Islamist regime that took power in 1979. However, the primary motivation was President Obama’s effort to woo the Iranian regime and seek to change its backing for terrorism in the Middle East.

The Trump administration has sharply reversed course and is working hard to punish Iran for its terrorist activities. Iran has been linked to the deaths of scores of Americans through its backing for terrorism.

Defense Secretary James N. Mattis has been one of the administration’s main hawks on Iran, although he recently softened his opposition to jettisoning the Iran nuclear deal. In the administration’s recently released defense strategy blueprint, Mr. Mattis shifted the focus of American defenses from countering terrorists to confronting nation-states. He said Iran “continues to sow violence and remains the most significant challenge to Middle East stability.”

“In the Middle East, Iran is competing with its neighbors, asserting an arc of influence and instability while vying for regional hegemony, using state-sponsored terrorist activities, a growing network of proxies, and its missile program to achieve its objectives,” he stated.

Joint Staff revising strategy

The Pentagon’s Joint Staff is working on a revision of U.S. military strategy following the release of Defense Secretary James N. Mattis’ new national defense strategy and the updated Nuclear Posture Review. Both the strategy and review outline significant shifts in approaching foreign threats and in directing American responses.

Air Force Gen. Paul J. Selva, vice chairman of the Joint Chiefs of Staff, announced the launch of the military strategy revision at a hearing Tuesday before the House Armed Services Committee.

“The national defense strategy provides detailed defense policy guidance for military strategy, planning and operations,” Gen. Selva said in his prepared statement. “Therefore, the chairman’s 2016 classified national military strategy will require an update to maintain complete consistency with the national defense strategy and the president’s national security strategy released in December.”

The process of revising military strategy began shortly after the new defense strategy was announced….